Breaking Through the "Small Business" Barrier Thursday, July 11, 2002

1. Breaking Through the "Small Business" Barrier Thursday, July 11, 2002

2. The Federal IT MarketWhat You Need to Know James A. Kane Ph.D. July, 2002

3. Agenda • Introduction to FSI/Federal Sources • The New Federal Market • Federal IT Budget Analysis and Spending Forecast • Federal Business Basics and Examples • Conclusions

4. Generate leads Create partnership and teaming opportunities Identify and capture new targets Provide customized analyses and insights Networking and educational events Support clients with on-call research FSI Client Support Services Events Market Intelligence Subscription Services Consulting FSI Helps You Succeed

5. Market Intelligence - Internet Services FSI has the timely information that is critical to your success: • Opportunities and Awards • Stay on top of opportunities with keys contacts, awards and strategic information • Profiles ( NEW! ) • Government Agency - budgets, IT trends, major programs, spending patterns, key contractors, dominant contracting vehicles, key senior contacts all in one place • Vendor - 500 IT contractors, major contracts, Points of Contact and more • Personalized My FSI tailored to your market intelligence needs • Simplify your searching with our advanced push email technology • Control what’s important with your customizable My FSI profile

6. Custom Consulting FSI’s seasoned consultants strengthen business development, marketing and sales initiatives: • Discover and analyze market trends and technology drivers that are shaping the course of government IT business • Attack the marketplace with realistic strategies and action plans targeted for your business goals • Identify teaming, merger and acquisition opportunities Drive business growth for your organization utilizing FSI’s market and business expertise

7. The Federal IT MarketA Market You Cannot Afford to Ignore

8. Shattered Misconceptions The proposal process is way too long • You can’t make any money from the government Chasing one RFP can drain your marketing budget for the year Government only buys from vendors in the DC Metro area I sell to a specific vertical market, not to the government I wouldn’t even know where to begin my Federal strategy • The government requires a separate set of accounting books for contractors Only local DC companies know about RFP release dates As a small business, we can’t afford to stretch into new markets Contractors are subject to intense audits Now more than ever before, the Federal government is buying in a commercial-like manner

9. Legislation Has Made It Easier to Do Business 1966 1974 1990 1993 1994 1994 Freedom of Information Act (FOIA) Government Performance and Results Act (GPRA) Federal Acquisition Streamlining Act (FASA) Government Management Reform Act Privacy Act (PA) Chief Financial Officers (CFO) Act 1995 1996 1996 1996 1998 1998 Paperwork Reduction Act Federal Financial Management Improvement Act (FMFIA) Government Paperwork Elimination Act (GPEA) Federal Activities Inventory Reform Act (FAIR) Federal Acquisition Reform Act (FARA) Information Technology Mgmt Reform Act (ITMRA) Legislation created an environment that is more commercial-like

10. Federal IT Budget Analysis and Spending Forecast

11. IT Spending and Budget Trends DoD and Civilian percent shares are maintaining their 50%-50% share Compound Annual Growth Rates (CAGR) for the period shown: Civilian = 6.5% Defense = 7.2% Combined = 6.8% Actual spending exceeds budget estimates: 2001-’02 Budget: 1% 2001-’02 Actual: 5.2% $52.5 $48.4 $46.0 Source: FSI Analysis, OMB

12. FY2003 DoD Agency IT Budgets Air Force, Navy and DISA have the most significant budget increases Source: FSI Analysis, OSD

13. FY2003 Civilian Agency IT Budgets HHS represents 20% of the civilian budget; top 5 agencies represent 59% Source: FSI Analysis, OMB

14. Federal Business BasicsNot a quick hit market: sales cycle is longer, but there is a longer-term revenue stream

15. F I L T E R Budget Priorities Market Drivers Upcoming RFPs What is your company’s strategy? Where can you best solve customer problems? What are the competitive threats? Model for Business Development Current Business Base Customers Verticals Platforms Installed Base Employees Expertise Partners Contracts Target Agencies and Opportunities

16. Representative FSI Budget Analysis Example - Department of Justice – 2003 IT Budget Combined DME & SS represents 90% of IT budget Source: FSI Analysis, OMB

17. Representative Market Driver Summary: Example - Department of Justice • A major reorganization aimed at making counterterrorism the department’s top priority • Development of interoperable systems that facilitate the timely and secure sharing of investigative information (IDENT and IAFIS) • Enterprise Architecture • Data sharing/data mining – INS and FBI • Computer and telecom security and access control; Information assurance; PKI • Increased application of biometrics, video teleconferencing and wireless communications • Sources: Department of Justice Strategic Plan FY 2001-2006 and DOJ FY 2001 Performance Report and FY 2002 Revised Final, FY 2003 Performance Plan.

18. Representative FSI Opportunity TrackingExample - Department of Justice

19. IT Spending Related to HLS Homeland Security • Political Realities and Drivers • Competing priorities and initiatives –more than ever with proposed new cabinet office • High-stakes risks and trade-offs • Budget • Significant federal monies – challenge is to track them • IT is a key component of many initiatives • Customers • Focus on lead agencies and key vertical markets • Don’t ignore State and Local Order your FSI Homeland Security Guide TODAY

20. Compelling Event Deadline associated? Consequences for failing? Business Need & Fit Change necessary? We can help? Funding Is there specific funding allocated? What else is competing for the funding? Competitive Position vs. past buying by customer? vs. past competitors? Decision Makers Identified? What’s our position? Internal Champion Do we have a true advocate? Are they involved in this decision? Do they have influence on the decision makers? Business Development Checklist

21. Hottest Opportunities for IT Companies • In Addition to Continued Growth in E-government, Outsourcing and Information Assurance, There will be Strong Demand for the Following: • Enterprise Solutions • Knowledge Management • Content Management • Web Enablement • Portals • Server Consolidation • Data Mining • Data Storage • Continuity of Operations • Wireless

22. Many New Entrants; Few Big Winners • More New Entrants, But at a Slower Rate • Too attractive a market to ignore – e.g., “HLS wannabes” • Many companies fail to properly assess the market • To Do It Right — Patience and Perseverance • There’s no substitute for research and analysis • Understand customer problems, and then present solutions • Foster relationships with the agencies • Build partnerships with key industry players • Did It Wrong — Lots of Lessons Learned • Unwillingness to invest: understanding; people; BD process • Peddle technology or product to end customer • No local presence near the customer

23. Elements of Success • Research • Customer’s mission and initiatives • Specific customer needs • What, how and from whom the Customer buys • Market Penetration • Tailor marketing strategy to the customer • Match company capabilities to customer needs • Highlight past performance and successes • Complete, accurate, well-prepared proposals • On-the-Job • Communicate, Communicate, Communicate • Highest quality performance • Build a partnership

24. Thank You James A. Kane, Ph.D. President & CEO 8400 Westpark Drive McLean, Virginia 22102 (703) 610-8700 kanej@fedsources.com